No. of Recommendations: 14
A lot time ago I suggested that those who couldn't decide between cap weight and equal weight could simply use momentum: pick the one that has done the best in the last month, and hold that one this month. This created a calendar-month-cycle timing system. Likely only suited to a tax sheltered account.
Here's a much simpler approach: Create a data series that is the ratio of the data total return series for RSP to the total return series for SPY. Do two EMAs on the ratio and use the crossovers as a timing signal for which to use.
I suggest maybe 20 days and 90 days. Using 20 and 50 worked better 1960-1999, and 20 and 120 worked better 2000 to date, but 20 and 90 seemed like a nice compromise that worked adequately in both sub-periods.
You'd think that 20 days for the "fast" EMA would lead to an extraordinary number of signals, but not really: an average of 1.37 round trips per year.
Ignoring commissions and tax, the 20-and-90 switching scheme would have beat SPY total return by 2.41%/year from Jan 1960 to Feb this year. Probably even more since then, as the megacaps have consistently soared.
That's not as fantastic as it sounds: simply holding RSP (and its historical index before introduction) would have beat SPY by 1.59%/year. Perhaps a better metric of the value added by the switch is how much it beat the average of the two choices: 1.62%/year. Still, over long periods that does add up.
I'm not saying this is the greatest system ever devised, I just thought I'd pass it on.
Some recent signals, market close on day shown.
2008-08-13 Buy RSP
2008-10-03 Buy SPY
2009-04-01 Buy RSP
2011-07-20 Buy SPY
2012-02-01 Buy RSP
2012-03-06 Buy SPY
2012-10-23 Buy RSP
2013-11-25 Buy SPY
2014-01-22 Buy RSP
2014-01-27 Buy SPY
2014-01-28 Buy RSP
2014-05-21 Buy SPY
2014-06-17 Buy RSP
2014-07-16 Buy SPY
2014-12-23 Buy RSP
2015-01-15 Buy SPY
2015-01-27 Buy RSP
2015-05-12 Buy SPY
2016-03-07 Buy RSP
2016-10-13 Buy SPY
2016-11-15 Buy RSP
2017-02-01 Buy SPY
2018-04-04 Buy RSP
2018-05-09 Buy SPY
2018-11-26 Buy RSP
2018-12-03 Buy SPY
2019-01-22 Buy RSP
2019-03-21 Buy SPY
2020-11-02 Buy RSP
2021-07-06 Buy SPY
2021-10-13 Buy RSP
2021-10-19 Buy SPY
2022-01-19 Buy RSP
2022-07-15 Buy SPY
2022-07-26 Buy RSP
2022-07-29 Buy SPY
2022-09-01 Buy RSP
2023-03-14 Buy SPY
2023-12-27 Buy RSP
2024-01-17 Buy SPY (still in effect)
Here's a quick link.
https://stockcharts.com/h-sc/ui?s=SPY%3ARSP&p=D&yr...Blue above red = hold SPY
Red above blue = hold RSP
Jim
